A GLOBAL LEADER IN METAL FLOW ENGINEERING

LEAN in Procure to Pay

Delivering efficiencies through Standardized Business Processes

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ABCAL, October 27th , 2015

Jorrit Meijerink, Director Businesses Processes, Vesuvius

Vesuvius is a global leader in molten metal engineering

Vesuvius is a global leader in molten metal flow engineering, providing a full range of engineering

services and solutions to its customers, principally serving the steel and foundry industries.

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Vesuvius at a glance

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Vesuvius at a glance

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• Revenue of £1,445 million

• Trading profit of £143 million

• Listed on the London Stock Exchange [vsvs]

Vesuvius at a glance

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Vesuvius Manpower by Region (2014)

Vesuvius Case study will demonstrate how companies can gain real Efficiencies and business Value from optimizing the Procure to Pay process through LEAN. ‘Standardized Business Processes’ are a means to analyse and redesign the process, the organization and its (IT) systems in coherence while ‘Continuous improvement’ creates the drive to keep challenging the achieved status quo.

Key take aways:

• LEAN and ‘Standardized Business Processes’ can deliver significant bottom line results in administration.

• Quick wins certainly there, but long term commitment required.

• Process-ownership key to success

LEAN in Purchasing

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Sales Managers VP FinanceRegional Lead Buyers /

Regional Purchasing

Directors

Regional VP HR

BU Purchasing

What are administrative Business Processes ?

BU Finance

CSD

Quotation

Sales order

Invoicing

Service contract

Consignment

Export

Master data

Finance

A/R

Credit & Collection

A/P & Payment

T&E

Financial reporting

General Ledger

Interco accounting

Tax & Treasury

Purchasing

Quotation

Purchase req.&appr.

Purchase order

Supplier qual.&eval.

Master data

HR

Payroll

Headcount reporting

Benefits

Expats

Train & Develop

Hire

Appraisals

...

IT / HSE / R&D …

HR Business Partner

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The 7Wastes you Must not ignore

Waste in Office

• Data entry errors, pricing

errors

• Missing information

• Lost records

OverproductionProducing too much

or producing too soon

TransportationAny non essential

transport is waste

InventoryAny more that

minimum to get

the job done

WaitingWaiting for an process

to complete, for a long

queueOver-ProcessingUnnecessary steps

ReworkCorrecting any error or

completing steps not

done before

Non Use of IntellectFailure to fully utilize

the time and talents of

people

MotionAny motion that does

not add value

• Creating reports

• Repeated manual entry of

data

• Outdated standard forms

• Inappropriate software

• Waiting for faxes, phone

calls , systems coming

online

• Copy machine

• Supplier responses

• A handed-off file to return

• Files waiting to be

worked on

• Open projects

• E-mail waiting to be read

• Unused records in

database

• Retrieving of storing files

• Carrying documents to

Good receipt note

brought to Finance

department

• Going to get signature

• More information that

customer need

• More information than

next process needs

• Creating reports that no-

one uses

• Making additional copies

• Walking to printer

• Scrolling and switching

between screens

• Manual entry

• Putting paper from left

to right etc.

• Searching files

‘8th waste’

Examples of ‘Waste’ in order processing

Rationale For Business Process Standardization

• Benchmark-level cost effective

• Deliver accurate consolidated Information

• Designed to serve (internal) customer

• “Responsive” with a minimal throughput time

• Controlled and managed as ‘‘end to end’ process

• Measured as base for continuous improvement

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Pressures from the market Internal challenges

Globalization of

customers &

markets

Meeting a host of

regulatory

requirements

& compliance

Address huge

diversity in

processes and

systems

Increasing

demands

of customers

(Cost, Quality,

‘Agility’)

Motivating and

managing peopleDependency on

suppliers, limited

opportunity to

pass pressure

on to suppliers

Margins under

pressure by

increasingly

competitive

markets

Consolidation of

Customers shift

power balance

Pressure from

shareholders to

perform

Resulting Requirements for

Vesuvius’ Business Processes:..

Providing accurate

Information for

decision making.

(Quality) Reducing

Transaction

costs. Reduce

‘Wastes’.

Increased need

for reliable

Performance

Measurements

Vesuvius’ rational for ‘Standardized Business Processes

• Local focus on processes and solutions limit our abilities :

consolidated reporting

process improvement

effective use of technologies and resources

Satisfy (internal) customers with ‘fit for purpose’ processes

One Vesuvius interface to customer and suppliers

Measure performance

• Optimizing Process, People and IT Solutions effectively provides strong potential for cost reduction.

Business Processes Re-design is about ….

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Optimise use of

TECHNOLOGY

PROCESS

PEOPLE

• ERP solutions

• User-interfaces

• New technologies: e-Invoicing,

automated data exchanges, imaging,

automated tasks, etc.

• Process design

• Gap analysis

• Implement changes

• Roles & responsibilities

• Skill alignment / Training

• Change management

What is a ‘Standardized Business Process’

• A Standardized Business Process includes Process, Tools and Organization

• It’s an ‘End to End’ process (customer to customer)

• It’s more than a ‘Process Map’ ; detailing the exact optimized tasks , tool and

condition for each activity in the process .

• The Standard Business Process defines the single best way to perform an

activity (process) in terms of Quality, Delivery / Service, Cost and People.

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Start of the SBP process

1 Business Process at the time

CIP tools : Site Workshops

Fixing issues within current

process

SBP Team

Observed Improvement

Potential

Workshop I

identified Kaizen Improvements &

follow up improvement actions

= “Low hanging fruit” !

Workshop II

identified “breakthrough” Improvements

“on the table” not yet “in the pocket”

‘5 weeks’

Process improvements

‘Unexplored’

improvement potential

Challenge “added value” of all process

steps , controls, documentation,

systems etc. of current process

Identify Value Added activities in the process

Reducing the waste helps to:

Improve Quality

improve Service

improve Efficiency / Cost

reduce Lead timeAfter

Before

Example of Process Mapping

Value-Added Time: 1 hour 25 minutes

Elapsed time Order to Delivery: 30 days

Know your customer

In a business process, understanding who the customers are, and what

their requirements are, is very crucial to eliminate waste

Principles of creating “as-is” process

Capture data

yourself : “Go & See”Use paper and pencil

Every person

involved must be in

team

Walk, understand,

validate/ cross check

Value Stream

Mapping

Go & See

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Capture data

yourself : “Go & See”Use paper and pencil

Every person

involved must be in

team

Walk, understand,

validate/ cross check

Value Stream

Mapping

Process mapping methodology - overview

Day 1 Day 2

Value Stream Analyses

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Planning tool to optimize results of

eliminating waste

Format and symbols for mapping

Process mapping methodology – Current State

Process mapping methodology – Action plan

• Action plan defined in order to realise the new process

Process mapping methodology – Deliverable

• Proposed draft for business process (P2P – raw material)

• Saving on one less administration clerk

• Reducing lead-time of suppliers

• Reduce transport cost by better process

• Reducing order processing time

• Providing forecast to Suppliers

• Having performance measures for process

Where is the money ?

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VSM

COST

VALUE TO BUSINESS

For each Business Process Domain (P2P, O2C, R2R ) :

• Business Process Level 1 – 3 High level to detailed flow charts and step by step descriptions of

• Activities – What & How

• Responsibilities and roles

• Performance measures

• Business Controls

• System Blue Prints : Detailed configuration of ERP

Process step in ERP

• Implementation Test Scripts & Sign Off Checklist

Documentation delivered by SBP

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The Process Owner is responsible for the governance of process performance and process change — and specifically:

• Ensures appropriate process designs, based on business requirements.

• Drives global implementation of and adherence to the SBP’s

• Defines goals, objectives, KPIs (Key Performance Indicators), and the measures that are aligned with the organization strategies.

• Monitors and reports process performance against KPIs

• Synchronizes process improvement plans with other process owners within the value chain and other interfacing processes.

• Process change to increase the maturity of the process (roadmaps)

Role of Business Process Owner (BPO)

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Obstacles

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Example of new processes at Vesuvius: Manifest orders

• Order to suppliers directly created by Operations Scheduler

• Commercial framework is done at contract level / blanket order

• No approval steps on release of PO / Call-off

• PO is now delivery schedule (Manifest)

• Automation of Order Collaboration through Cloud based supplier portal

• Supplier responses reviewed in case non-fit with MRP only

• Barcodes issued with PO to supplier

Benefits:

• Purchasing removed from order issuing process

• Purchasing can focus on Commercial & Strategic task

• Direct contact between Operations and Suppliers

• 40 % less time spend on Order handling & Approvals

Supplier Portal Automation based on SBP – P2P

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Vesuvius focused

on Standardization

before Automation

Vesuvius’ Results of Standard Business Processes

• Questions ?

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• THANK YOU

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